Under App passwords, tap or click Create a new app password.
A new app password is generated and appears on your screen.

When you’re prompted for your Microsoft account password on your Xbox console, enter the app password that you created online.

Solution 3: If you used a third-party email account as your Microsoft account, make sure you’re using the correct password

You can use any email account to create a Microsoft account. If you use a third-party email account (such as Gmail or Yahoo), you may have set up a password for your Microsoft account that is different than the password you use to access your email. If you can still access your Gmail or Yahoo email but can't use that same password to access your Microsoft account, you might have used a different password. If you‘ve forgotten the password for your Microsoft account, you'll need to reset your Microsoft account password.

Solution 4: Try clearing and re-entering your username and password

When you're prompted to sign in on the console, your password might be auto-populated in the Password field. If this happens, clear the characters that appear in the Password field, and then enter the correct password.

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